DICK KOVACEVICH, CHAIRMAN OF Wells Fargo, told the audience at the 37th Annual Bank of America Investor Conference in San Francisco that while the current credit environment may reek of “war, pestilence, and famine,” all hope is not lost for the nonconforming, or jumbo, loan market.
Mortgage loans above $417,000 are considered jumbo loans. In many parts of the country where home prices are high, residents are heavily reliant on jumbo loans and are struggling to get financial backing for such loans during the credit crunch.
“The nonconforming market will be back in no time at all. If you were worried that that's going away, don't worry. Trust me,” Kovacevich said at the conference according to numerous published reports.
One way that could happen is if Fannie Mae and Freddie Mac are given permission to buy, insure, and securitize jumbo loans. Currently they are not allowed to, though U.S. Treasury Secretary Henry Paulson has been quoted as saying he'd consider allowing the Government Sponsored Entities to buy such loans—temporarily.
Whether or not jumbo loans do make a come back, some other mortgage product, probably a risky one, will spring up, said Kovacevich.
“Believe me, this is all going to happen again,” he said. “We never learn our lesson.”
Learn more about markets featured in this article: San Francisco, CA.